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May 28, 2020
2020-1411

New York Senate bill would allow businesses to treat income earned working from home, outside New York due to COVID-19, as exempt from NY income tax and withholding

New York Senate bill S.8386, introduced on May 21, 2020, would provide relief to businesses whose employees are working from home outside of New York State due to COVID-19 by confirming that such telework is due to the necessity of the employer and not the convenience of the employee and is exempt from New York income tax and income tax withholding.

The bill would apply only for the period that employers mandated employees work from home pursuant to the emergency declaration in New York Executive Order 202. Should the bill become law, it would be effective immediately but would apply only to the time covered by the executive order, which is currently March 7, 2020 through September 7, 2020.

Under New York's convenience-of-the-employer rule, the employer is required to withhold New York state income tax from all wages paid to the employee if (1) the employee spent at least one day in the year in New York and (2) the reason the employee is working from home outside of the state is for the employee's own convenience. If the reason the employee is working from home is for the convenience of the employer, work from home is excluded from the nonresident income tax withholding requirement. (TSB-M-06(5) I.)

Thus far, the New York Department of Tax and Finance has not issued guidance pursuant to COVID-19 and the so-called "convenience-of-the-employer rule," leaving businesses with uncertainty as to how the Department would rule on the matter should employers reach the conclusion that income employees earn working from home outside of New York during the COVID-19 emergency is exempt from New York income tax and income tax withholding.

The New York Department of Tax and Finance has received numerous requests to issue guidance similar to that contained in S. 8386. For instance, on April 10, 2020, the New York Bar Association issued a letter of  recommendation urging COVID-19 relief through the convenience-of-the-employer rule.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)
   • Kristie Lowery (kristie.lowery@ey.com)
   • Peter Berard (peter.berard@ey.com)

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